Pushing for the Top Quartile

Q: What opportunities do you foresee in the expansion of Mexico’s pipelines system?

A: There are around 30 million people in Mexico that do not have access to electricity, which in a country as advanced as this one implies underdevelopment. Even though new private companies are entering the market the number is still low. For instance, Texas’ 58,000 miles of pipelines have been developed by over 30 companies, while on the Mexican side the task fell mainly to state-owned companies. The market is underserved if we compare it with the world. Even with what has been bid and under construction it still is insufficient for the needs of the Mexican industry. Guadalajara, which has an important industrial market, is being served by a single pipeline.

Companies are looking at Mexico as an investment opportunity because of industry necessities that are not being addressed. This represents an opportunity not just for pipeline-building companies but for the automation and electricity markets and of course for the users, either commercial, residential or industrial. Companies setting up shop in Mexico make the decision to come because they realize energy, production and labor costs will become highly efficient.

Q: What are Emerson’s top products for automating natural gas logistics?

A: Investors interested in the automation of natural gas logistics are private players and some private customers we know from other markets. We already have an established relationship with them and understand their needs from an automation standpoint. The most vital solution we have in our portfolio is a custody-transfer piece for the flow, measurement and instrumentation packages that are critical in gas pipelines. The second are the valves associated with these pipelines, in which Emerson has a longstanding history in Mexico through our brandname Fisher, established over 50 years ago. The third is a communication piece to properly regulate and control the production. In regulation and control an important element is gas quality, which we can monitor through the analytical package we provide. Our data acquisition and management portfolio is critical for natural gas producers and addresses the challenges the natural gas industry is facing today.

Q: How is the presence of private companies influencing the solutions and investment in preventive maintenance solutions?

A: New pipelines are being set with a long-term vision so operators can be comfortable with them for the next 20 or 25 years. Emerson bought ISA Energy Solutions International, which is a pipeline manager designer-software package. The second largest market for this software is Mexico. This illustrates how private players are getting involved in the design and placement of pipelines from the very beginning with the right measurement and control points, diameters and compression stations. Emerson is urging customers to start thinking beyond a maintenance mode for their facilities, which is what we have done for CFE and PEMEX for numerous years, and to look at operating projects over their lifetime in the top quartile of performance, with minimal losses, maximum optimization, critical safety and proper measurement of custody-transfer.

Q: How can your products help fossil-fueled power plants become more flexible and achieve better plant cycling?

A: Emerson offers a leading distributed-control platform under our brand name Ovation, which is specifically designed for the power-generation industry. It is strongly positioned in the market. Ovation is essentially the central nervous system of a power plant. It allows operators flexibility in using either fossil fuel or natural gas. The quality of the fuel or gas that enters power-generating facilities is absolutely crucial from an operational standpoint. As the quality of natural gas varies, if not properly measured, it will hinder the productivity of the plant and will not allow the required flexibility. The same principle applies to our control portfolio. Index qualities of gas, fossil fuels and emissions will continue to be important, so our portfolio is geared to handle all these applications.

Q: What are the main arguments for investing in automation?

A: Many of the facilities in operation today could be safer with an automation investment. It is a lot less expensive than what people expect and its benefits have been previously measured with proven improvement in cycle times and uptime. Ongoing operational costs are going to be reduced with preventive maintenance and automation by 30 to 60 percent. Automation also implies operating with fewer people and fewer human decisions, allowing for control of the facility through a control screen with pre-existing diagnosis, thus reducing the total of potential accidents. Significant savings can be seen with little investment in strategic areas of automation and preventive maintenance.

Even though the advantages seem obvious sometimes people do not invest in this. Sometimes power companies are state-owned and given budget cuts the financial situation can prevent them from advancing upfront investments. The return on investment is under six months in these facilities but it is difficult to find funding for revamps. Hopefully the Energy Reform PPPs will allow these types of projects. The market will realize the benefits of this investment very soon in this sector.

Q: What will be the most important element in digitalization trends in the coming years?

A: The process of connecting all control points in a power plant and elevating them to make smart decisions in day-to-day operations is what will sway the market for the next five to 10 years. Emerson’s solution for this is called the Plantweb™ digital ecosystem. It offers the capability many companies will look for in the near future to connect instrumentation, automation and control systems to key enterprise management resources. This is what the industrial Internet of Things promises, the ability to harness technology to work in measurable and meaningful ways. Emerson will be investing a lot of its research and development funds to connect individual points into intelligent business solutions for our customers. By doing this, our estimates show that key industries like the oil and gas sector in Mexico can improve earnings by as much as 15 percent and achieve Top Quartile performance. Top Quartile is defined as achieving operations and capital performance in the top 25 percent of peer companies. To help customers achieve Top Quartile, Emerson launched a technology and engineering-based program called Operational Certainty in October 2016. This program offers methodologies and best practices to industrial companies to improve operational performance in four main categories: safety, reliability, production and energy management.

Q: What is the adoption rate for automation and digitalization solutions?

A: Around 80 percent of Mexican companies are considering digitalization and automation solutions because of the amount of competition and the need to be more efficient, reduce costs and increase business opportunities. Industries that traditionally did not place a high priority on automation and energy management and efficiency are now targeting them as their major operational improvements. Given the ROI, private players are likely to make an investment regardless of size.

Q: Which segments offer the greatest potential for growth and which Emerson products would best fit this market?

A: Traditionally automation was used for control but where we see growth in the next 15 years is in the areas associated with energy efficiency and energy management as well as safety and reliability. Energy efficiency is the most exciting because of the amount of energy wasted in the industries we serve. It goes from a hardware standpoint with our measurement equipment to also connecting it with an energy-management software tool.

Emerson develops a diagnostic of energy to determine the amount of energy being used and what could be saved if automation technology is properly applied. Using less energy will drive improvements no matter the industry. For instance, the reduction of 2 or 3 percent of energy used by large consumers represents large amounts of savings for them. That is a side of the portfolio where we see a lot of potential and we are driving several trials in Mexico to push it in that direction.

Q: What are you doing to make sure you exploit all the upcoming opportunities in the country?

A: Emerson has been in Mexico for 60 years, we have 15,000 employees, 20 manufacturing facilities and nine regional offices. We have the ability to react to new market opportunities quickly. We can deliver projects on time and on schedule because we have a strong project management office. The concept of main automation contractor has been well accepted in the industry both by natural gas pipelines and electricity sectors. Our network of over 100 service engineers all over the country is ready to provide service 24 hours a day. We are well positioned to take advantage of the opportunities upcoming in the electricity sector.